The stock market decline on Thursday and Friday was the worst in four years, as investors worrying about oil, China and Federal Reserve policy fled stocks and moved money into U.S. Treasury bonds and gold.

The S&P 500 Index
SPX, +0.24%
lost 5.8% last week and is now down 4.3% this year,through Friday.

Monday has been a wild ride. The Shanghai Composite
SHCOMP, +0.54%
Index is down 8.5%, wiping out this year’s gains, and China’s stock selloff was called “Black Monday,” on the mobile app of the Xinhau News Agency.

The S&P 500 was down as much as 5.2% early Monday, but losses were later pared, and the index was down just 1.3% at mid-day.

Here’s a chart showing how the S&P 500 index has performed over the past five years:

FactSet

The S&P 500 looks as if it has had a pretty smooth run over the past five years, but there have been some rocky months.

The biggest drop during that period was from July 22 through Oct. 3, 2011, when the index fell 18.3%. Here’s how the 10 S&P 500 sectors performed during that period, from best to worst:

S&P 500 sector

Decline from July 22 through Oct. 3, 2011

Utilties

-2.9%

Consumer Staples

-7.5%

Telecommunications Services

-8.5%

Health Care

-13.5%

Information Technology

-14.4%

Industrials

-17.3%

Consumer Discretionary

-17.5%

Financials

-26.4%

Energy

-27.4%

Materials

-28.0%

Source: FactSet

It’s important to point out that many sector dynamics have changed since 2011.

The U.S. financial industry is, of course, in much better shape, following years of capital building and belt tightening. Higher interest rates would be good for banks, most of which have balance sheets positioned so that yields on loans and investments will rise faster than funding costs when the Federal Reserve begins raising short-term interest rates.

The energy industry is in the midst of a painful shake-out following years of oil-production increases in the U.S., a firm commitment by Saudi Arabia to keep production high to defend its market share, and slow overall demand.

The telecommunications-services and consumer-discretionary sectors are being greatly affected by the pounding that television-content producers and pay-TV service providers have been taking as investors perceive that “cord-cutting” is accelerating.

But there’s no denying that utilities were the strongest group of stocks during that terrible summer of 2011.

Here’s a look at sector performance during the most recent large decline for the S&P 500. It slumped 7.4% from the close on Sept. 18 through Oct. 14, 2014:

S&P 500 sector

Change from Sept. 18 through Oct. 14, 2014

Utilties

1.3%

Consumer Staples

-2.1%

Telecommunications Services

-3.9%

Health Care

-6.7%

Financials

-7.3%

Industrials

-7.8%

Consumer Discretionary

-7.8%

Information Technology

-8.1%

Materials

-10.0%

Energy

-13.6%

Source: FactSet

The same four sectors ranked highest for both periods — the summer of 2011 and the fall of 2014 — with utilities in the lead each time. The utilities sector actually rose 1.3% during the last big market decline.

You shouldn’t own common stocks if a 50% decrease in their value in a short period of time would cause you acute distress.
Warren Buffett

So what does the possibility of a broad decline over a period of weeks mean to you? It clearly means nothing to Buffett, unless the drop is so large that he is tempted to lead Berkshire Hathaway into making another discounted acquisition.

If you’re holding utility stocks, you might feel safer — and at the same time enjoy a high level of dividend income.

Then again, maybe it might help your long-term discipline to see how the S&P 500 sectors have performed over the past 10 years:

S&P 500 sector

Total return

Health Care

192%

Consumer Staples

180%

Consumer Discretionary

173%

Information Technology

143%

Industrials

141%

Utilities

115%

Materials

105%

Telecommunications

101%

Energy

64%

Financials

5%

Source: FactSet

Health care has been the best sector for just about any time period you look at over the past decade, reflecting not only the aging of the U.S. population, but the constant stream of innovation.

The strength in the two consumer sectors reflects the dominance of consumer services in the U.S. economy.

So will you listen to Buffett or will you be up late worrying? Either way, the performance of the sectors can help you to act accordingly.

Philip
van Doorn

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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Philip
van Doorn

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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